New Economic Geography: Economic Integration and Spatial Imbalances
This chapter provides a comprehensive view on the field of New Economic Geography (NEG). It starts by describing the background in adjacent fields of economics which made the surge of NEG possible. It lays out the necessary ingredients and fundamental for
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4.1
Introduction
This chapter provides a comprehensive view as well as a conceptual discussion of the field of New Economic Geography (NEG). It starts by describing the background in adjacent fields of economics which made the surge of NEG possible. It then lays out the necessary ingredients of fundamental forces at work that define any NEG framework, assesses the state of the art in NEG and tracks the evolution of the field.
J. M. Gaspar () CEGE and Católica Porto Business School, Universidade Católica Portuguesa, Porto, Portugal CEF.UP, University of Porto, Porto, Portugal e-mail: [email protected] © The Author(s) 2020 S. Colombo (ed.), Spatial Economics Volume I, https://doi.org/10.1007/978-3-030-40098-9_4
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Krugman’s seminal Core-Periphery (CP) model (Krugman 1991a) is perhaps the most well-known general equilibrium model that explains the riddle of uneven spatial development and, in particular, the forces that lead to spatial agglomeration of industry and the explanation on why spatial imbalances in the distribution of economic activities arise in an increasingly globalized economy. While the CP model is widely regarded as the precursor microfounded model in NEG, it is the combination of the seminal works by Paul Krugman, Masahisa Fujita, and Anthony Venables that marked the birth and clearly defined New Economic Geography as a field in its own right. However, economic agglomeration should not be held in a too general way, as its interpretation depends on the spatial and historical scale. In that sense, NEG cannot be held entirely as brand new, as there have been other equally high-quality papers in other fields of spatial economics, such as economic geography, urban economics, international trade and regional economics (Fujita 2010; Gaspar 2020a). As such, to provide an overall assessment of the subject requires one to identify both the early and the recent theoretical contributions in economics that serve as background to, or are intertwined with, NEG. Ever since, many researchers have devoted their attention towards providing more theoretical foundations and empirical research that add to the study of the geographical distribution of economic activities. Several works building on Krugman’s seminal CP model have emerged and extended its original framework in order to provide new insights on NEG and on the study of economic integration and its impact on the rise of spatial imbalances. Some have come to incorporate and endogenize the role of cities and urban systems (e.g. Fujita and Krugman 1995; Fujita and Ogawa 1982). Others explain the forces that contribute to, or drive away from, agglomeration outcomes, through the interaction of input-output linkages (e.g. Krugman and Venables 1995; Venables 1996). Another wave of NEG models have been dedicated to the study of the bilateral relations between agglomeration and regional growth (e.g. Baldwin and Martin 2004). From within the economics community, it has been frequently argued that NEG needs to overcome several technical limitation
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